The Housing Bubble

The Washingtonain reports on Delaware. “You might say that Tony Kornheiser, host of ESPN’s Pardon the Interruption, and wife Karril bought in Rehoboth Beach, Delaware, at the worst possible time. It was 2005, and the market was nearing its peak. Rehoboth’s walkable community reminded him of Long Beach, New York, where he lived after college. ‘It was familiar to me,’ he says. ‘I bought the house on impulse at the height of the market. The real-estate agent was thrilled.’”

“Ocean City grew rapidly between 2000 and 2006. Foreclosures still make up a significant portion of the inventory—294 homes sold in the first quarter of 2011, 15 percent of them foreclosures. Jennifer Cropper-Rines, president of the Coastal Association of Realtors, says Ocean City buyers can find a lot of good deals, particularly on condos with three or more bedrooms.”

“What $500,000 buys: A second-floor three-bedroom, two-bath condo on the bay at Hidden Harbor sold in January for $520,000, nine months after being listed for $599,000. What $1 million buys: At the Gateway Grand, at 48th Street and the beach, a four-bedroom, three-bath eighth-floor condo with ocean views sold in April for $899,900. It had been on the market 14 months and originally listed for $1.03 million.”

The Washington Times. “Most prospective homebuyers are aware of today’s stricter lending standards, but they also face another challenge when it comes to buying a home: the need for down-payment funds. Michael Devlin, a loan officer with George Mason Mortgage in Fairfax, said, ‘Each county in D.C. and the Maryland and Virginia suburbs offers low-interest loans for down-payment funds or a grant for moderate-income households.’”

“In Maryland, Tamika Johnson, a Realtor with Re/Max Specialists in Upper Marlboro said the tried-and-true method of borrowing from parents or getting a gift from them is an option for some buyers, but she also said some buyers sell items on eBay or Craigslist to build up funds. ‘The main thing is just to commit to it, to sacrifice for a year if you need to, eating out less, going out less and having a savings goal to meet every month,’ Ms. Johnson said.”

“Members of the military may qualify for a Veterans Affairs (VA) mortgage, which does not require a down payment, and zero-down-payment loans are available through the Department of Agriculture’s (USDA) Rural Development housing program.”

National Public Radio. “Five years ago, it seemed like the right time for the Bullards to buy, after renting for a decade. Thousands of military families did what the rest of the country was doing: They bought a home. It didn’t matter that they were moving every few years; home prices were only going up. ‘It was seen as an investment,’ Sarah Bullard says. ‘And we had many friends in this town, in particular, who bought and sold within two years, and did so very successfully.’”

“‘I mean, it’s to the point where we’re about to drown,’ says Mindy Nichols. She and her husband are desperately trying to sell the townhouse they bought back in 2005 before he enlisted in the Army. The house is in Pennsylvania. She and her husband and their three daughters live in Fort Campbell, Ky. They’re actually about to move again. For a couple of years now, they’ve been paying the mortgage on that empty house in Pennsylvania. They just decided to let the house go into default, though they are still hoping to sell it.”

“‘I don’t see us buying a home again anytime soon,’ Nichols says. ‘We’d just love to live on post and be tenants and not have the responsibility of property ownership anymore.’”

The Daily Local News in Pennsylvania. “Chester County real estate outpaced other counties in the Greater Philadelphia area in homes sales in the first half of 2011 an industry study reported — a dubious distinction considering the residential market’s lackluster performance. Chester County also lost the least amount of ground among all the other Pennsylvania counties in the region regarding the number of homes sold.”

“Steve Storti, senior VP of marketing at Prudential Fox & Roach Realtors in Easttown, advises that not only do home sellers need to be patient; most important, pricing has to be correct. ‘Where there is a tremendous amount of inventory to look at, in order to show a property, it has to be at the best price,’ Storti said. If the property is priced too high, ‘you are excluding yourself’ from the market.”

“Ryan Sweet, a senior economist with Moody’s Analytics of West Chester, agrees. The struggle started when the federal tax credit for home buyers ended in June 2010. Back then ‘we expected some pain,’ he said.”

“The housing marketing in the Greater Philadelphia area is at rock bottom pricing-wise, Sweet said. Once the market makes modest gains, and Sweet is forecasting that will happen in 2012, real estate will start to rally. ‘When people see prices going back up, they will dive back into the market,’ Sweet said, explaining buyers do not want to buy a house that will be worth less in a few months.”

The Patriot News in Pennsylvania. “The builders association’s recent Home-A-Rama event in Upper Allen Township featured a lineup of seven luxury homes brimming with every possible amenity — probably spurred more customers to renovate than to build. ‘People could look at the hardwood floors, the kitchens, the organized garages, the landscaping, and say, ‘Oh, we could do that,’ said Wendy David, executive officer of the Home Builders Association of Metro Harrisburg, who recently decided to remodel her own home after it languished for an agonizing 170 days in a moribund market.”

“‘I gave up,’ she said. ‘You can have a brand-new bathroom for $35,000, and you can be happy.’”

“Dave Ionni, owner of Ionni Properties in Lower Paxton Twp., never knew a down housing market. The first signs of trouble came in 2007. Reports of overheating housing markets and bursting bubbles wafted in from sun states such as Florida, Arizona and Nevada. But in Harrisburg, those places might as well have been foreign countries. Riding positive word of mouth from proud homeowners showing off their palaces, Ionni’s company zoomed from building three homes its first year to juggling as many as eight projects annually.”

“His homes rose in price from the $300,000 to low $400,000 range to larger, more elaborate luxuries costing $600,000 and up. ‘It was full steam ahead,’ Ionni said. ‘Those were the days I would tell people, ‘I can’t build your house right now,’ and they would wait.’ When the market started to go down, it was hard to swallow,’ he said.”

“Even with their crews busy and remodeling projects in the pipeline, there’s a sense of treading water among once high-flying homebuilders. The big question remains: When will the housing market get back to normal? At the builder’s association, Wendy David hears plenty of anecdotal evidence of activity, but it’s difficult to spot trends. ‘Would I say it’s coming back? I don’t know,’ she said.”

“A larger question might be: What will the so-called ‘new normal’ look like in terms of building volume? David insisted that bubble-inflated building levels of the mid-2000s should not be used as a realistic benchmark. ‘We’re never going back there,’ she said. ‘That was a boom.’”